Victoria Gold Corp (V.VIT) announced September 4 the completion by the Yukon Environmental and Socio-Economic Assessment Board of the Draft Screening Report for its Eagle Gold Project, located 375 kilometres north of Whitehorse, Yukon Territory. The report recommended that “the Eagle Gold Project be allowed to proceed without a review.”As a result, completion of the environmental assessment process is expected by 1Q 2013.

According to a February 2012 feasibility study, Eagle contains 91.6 million tonnes grading 0.78 grams per tonne gold for a resource of 2.3 million ounces proven and probable. The indicated resource is 4.86 million ounces, and the inferred resource is 1.49 million ounces. The study forecast annual production of 192,000 gold ounces for 12 years at a cost of $542 per ounce. The initial CAPEX (including prestripping) is $399.7 million, while life-of-mine sustaining capital costs are $132.9 million and closure costs (net of salvage value) are $64.2 million. Based on $1,325-per-ounce gold, the project has a pretax net present value (NPV) of $380.8 million (at a 5% discount rate), a 24.1% internal rate of return and a payback period of 3.1 years.

The company further announced gold assays from Eagle September 10. Highlights include

RW: Can you begin by discussing the importance of the completion of the Draft Screening Report for the Eagle Gold Project?

JM: Sure. It’s a major step in the environmental assessment process. We now have a document that’s been approved by the Board, and their recommendation is the project move forward with no further review. It’s a very positive step. It’s not the end of the process; there is a public review period of 30 days, and then they have a certain period of time to incorporate any comments they’ve received during that period. But we’d expect the final [environmental assessment] to wind up before the end of the year or certainly early in 2013, which would allow us to start construction in the spring.

RW: This project requires only provincial approval?

JM: It is a territorial process, and the feds can participate in it, but it is run by the Territory. The Yukon Environmental and Socio-Economic Review Board is an independent board and not a government panel.

RW: It makes its recommendations to the territorial government?

JM: Yes.

RW: What is your current path to production?

JM: We start construction in about April 2013, and it’s about an 18-month construction time period, and so we’ll be in full production in 2015.

RW: This project has a low CAPEX. How will it be financed?

JM: It’s a low CAPEX because it’s heap leach; we won’t be building a mill and tailing ponds. We’ve hired Rothschild as our advisor and have been working with them over the past few months lining up debt financing. We think we’re well on the way to lining up between $250 million and $300 million in debt. We’ve sold some non-core assets in Nevada that are netting us over $60 million. Equipment leases are quite common, and so that’s another $50 million. That gets us pretty close to the $430 million in capital costs. We still have some other non-core assets in Nevada that we can sell. We may sell a royalty to raise more capital. But we really don’t want to go back to the equity markets when our share price is at a 52-week low.

RW: What I hear from pretty everyone I talk to is this general horror of the equity market. They’d rather simply not go there.

JM: No.

RW: You said you sold some assets in Nevada. Are you close to a decision on whether you’re going to concentrate exclusively on the Yukon?

JM: We still have a couple of assets in Nevada, but if someone made us the right offer, we’d sell them. We’re 100% focused on the Yukon both in terms of the development of Eagle but also in terms of long-term exploration opportunity.[pullquote] “At $2,000 gold, we would cashflow about $270 million a year. The IRR would go up to about 52%, and the NPV would go to about $1.2 billion”—John McConnell[/pullquote]

RW: Dublin Gulch [which incorporates Eagle] is a very large property, 650 square kilometers. How much of that has been explored?

JM: Most of the focus of the past 20 years or so has been on the Eagle deposit itself. Only within the last two years have we started stepping out and looking at other opportunities. We’re currently drilling an area called Olive. We haven’t seen the assay results yet, but there could possibly be another small open pit at Olive. Last fall, we staked two big areas to the south and west of us, and this is actually First Nation settlement land. And because of our good working relationship with the First Nation, they gave us permission to stake that. We’re very excited about the potential of those two blocks, and we mobilized a team that just started yesterday doing soil samples there. So it could be very exciting in the longer term.

RW: Do you plan a resource update for Eagle?

JM: We just completed what turned out to be an 18,000-metre drill program on Eagle, and that was diamond drilling. The budget was $8 million. We’re currently doing an RC program on Eagle to further upgrade the resource and derisk the mining. That program probably won’t be complete until the end of September, and by the time we get assays back [see above for latest assays], it will be October or November. We’ll be looking to upgrade the resource probably early next year. Our focus isn’t really on adding more ounces; it’s adding higher-grade ounces.

RW: There is a lot of excitement about the Yukon. How would you compare it to such other world-known areas as Carlin and Timmins?

JM: I’ve been in this business for over 30 years and primarily focused in Canada and the US. The Yukon is by far the best jurisdiction to get things done. You’ve got people there that understand mining and the economic benefits of mining. You’ve got a great permitting process, and by and large all the land claims of the First Nations have been settled. There are contractors who know how to mine and businesses built up around mining. Nevada is becoming very bureaucratic in terms of its permitting process, with both the state and federal process, and it really drags out.

The other thing about the Yukon compared to [Nunavut and the NWT] is the infrastructure. Despite the fact that we’re in the middle of the Yukon, we have a paved highway within 50 kilometers of the project site. We have a year-round gravel road right into the site already. We’re within 50 kilometers of grid power and we have an agreement in place with Yukon Energy Corp to provide power during construction and operations. Mayo is a small town 50 miles away, but it has phone service and an airport with regular flights. Again, despite being up north, we enjoy very good infrastructure.

RW: I see gold is up to $1,739 today, and you’re going to be a low-cost gold producer. Assuming gold stays steady or goes as high as $2,000, as a lot of analysts believe, how would this affect the profitability of Eagle?

JM: It certainly improves it. At $2,000 gold, we would cashflow about $270 million a year. The IRR would go up to about 52%, and the NPV would go to about $1.2 billion.

RW: Your market cap is currently at $85 million; are you worried about a takeover?

JM: Yeah, it’s the number one concern of myself and the rest of the board of directors that we actually lose this property before we’ve been able to achieve good value for our shareholders.

RW: Do you have a poison pill in place?

JM: There is, but really they’re not overly effective. They buy you time to bring in another competing bid. We do have a bit of a poison pill in that Kinross T.K 16% of our shares and Sun Valley Gold about 12%. My discussion with both of them [indicates] they have no intention of selling at these low prices.

RW: Do you expect an appreciation in your share price?

JM: Yeah, we continue to derisk the project, and it’s baby steps in terms of permitting. We’re doing the detailed engineering now, and we’ve talked about some of the definition drilling on some of the deposits that we’ve continued to do. I think it makes it more and more attractive, and eventually the market will get it.

RW: How much cash does your company have, and what’s your burn rate?

JM: We’re probably just over $50 million in cash and marketable securities right now. We’re probably burning at a rate of $3 million a month.

RW: Where do you see your company in 2014?

JM: Either we’ll have been bought by someone, or we’ll be in construction at Eagle.

RW: Is there anything you would like to add?

JM: As you know from following the mining business in Canada, what holds up projects is not usually environmental things, it is generally relations with the First Nations. Me and my team spend a lot of time in the north and understand the importance of good relationships. I think it bodes well for the company that we were able to get an impact benefit agreement in place with the First Nation about a year ago now, so they are our partners, essentially.

When I go into meetings with the Environmental Review Board, sometimes the Chief comes with me just to show the support of the First Nation, and I think that’s pretty unique.

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